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Economic Outlook:
An Uneven Economic Recovery
The Chamber of Commerce for Greater Philadelphia
Philadelphia, PA (virtual)
June 16, 2020

Patrick T. Harker
President and Chief Executive Officer
Federal Reserve Bank of Philadelphia

The views expressed today are my own and not necessarily those of the Federal Reserve System
or the Federal Open Market Committee (FOMC).

Economic Outlook: An Uneven Economic Recovery
The Chamber of Commerce for Greater Philadelphia
Philadelphia, PA (virtual)
June 16, 2020
Patrick T. Harker
President and Chief Executive Officer
Federal Reserve Bank of Philadelphia

Good morning and thanks so much for that introduction, Andrea. It’s great to be back among friends
and fellow chamber members … at least in some form.
We may be meeting in unusual circumstances today, but I still need to give you the usual Fed disclaimer:
The views I express today are my own and do not necessarily reflect those of anyone else on the Federal
Open Market Committee or in the Federal Reserve System.
The New Abnormal
It’s now been more than three months since the onset of the COVID-19 crisis and the beginning of what
I don’t want to call the “new normal.” None of this — including the fact that we are meeting today
virtually — is normal.
Over that period, we went from enjoying strong economic growth, stable prices, and near-record low
unemployment to a sharp contraction of economic activity and tens of millions of job losses. Here in the
region that the chamber covers, the unemployment rate shot from 5 percent to more than 15 percent.
Meanwhile, more than 115,000 of our fellow citizens across the country have lost their lives to COVID19 — and the number continues to rise each day.
It has been a heartbreaking period.
Gus Faucher will give you a more granular look at the local economy in a moment, but on the national
level, I can tell you I expect 2020 to show a sharp recession; 2021 will be a growth year, with GDP and
employment picking up, though not enough to return the economy to where it was at the beginning of

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this year. All of this, of course, is quite uncertain, depending in a large part on how the virus continues to
move through our society.
Fed Actions
The Federal Reserve’s role in mitigating this crisis has been to use our lending powers to maintain our
underlying economic infrastructure by making sure that every sector of the economy has access to
liquidity. Our lending facilities are meant as backstops to the private sector. We don’t want to
disintermediate the private sector — we simply want to be there to support market functioning.
So, what have we done?
First and foremost, we have lowered our policy interest rate to near zero, a stance we decided to keep
unchanged at last week’s FOMC meeting. We intend to keep the rate near zero for the foreseeable
future, possibly through 2022.
In order to keep credit flowing, beginning in March, we began buying large amounts of Treasury bonds
and mortgage-backed securities. We have now purchased more than $2 trillion of these products. The
markets have largely stabilized, and we’ve slowed the rate of purchases. But we’re not stopping. We
intend to keep buying about $120 billion worth of Treasury bonds and MBS each month.
We’ve also rolled out a program to help cash-strapped local governments. The Municipal Liquidity
Facility, whereby we buy bonds from municipalities and states whose tax revenues have collapsed, is
designed to provide essential liquidity as they navigate the twin crises of the pandemic and the
economic downturn. Earlier this month, we had our first taker, with the State of Illinois tapping the
program for $1.2 billion.
We’ve also been working hard on launching our Main Street Lending Program, which is designed to get
cash into the hands of small- to medium-sized businesses whose operations have been hampered by
COVID-19 and the shutdowns. Since announcing the facility, we’ve heard a lot of feedback from
businesses across the country, and we’ve recently adjusted the program so organizations can take
smaller loans — even as small as $250,000 — and take a little longer to pay them back. We intend to
launch this program in the coming days. We view it as vitally important in providing a backstop to those
small- and medium-sized businesses that are — I don’t need to tell you — the lifeblood of the U.S.
economy.

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For the same reason, we have also bolstered the Small Business Administration’s Paycheck Protection
Program by supplying liquidity to financial institutions that are issuing loans to those businesses that are
receiving aid through the program.
American Unrest
Now, I want to switch gears a bit and address something that I’m sure has been on all of your minds.
In recent weeks, millions of Americans have raised their voices to demand social justice and racial
equality. The protests may have begun as a result of the horrifying death of George Floyd in
Minneapolis, but they quickly evolved into a broader demand for our country to finally rid itself of the
scourge of racism and inequality. The Federal Reserve takes those demands seriously, and we are fully
committed to building a culture of inclusion throughout our System.
At the Philadelphia Fed specifically, based as it is in the poorest big city in America, we’ve placed a
particular focus on equity and opportunity. Our Community Development and Regional Outreach
Department operates the Economic Growth & Mobility Project. This is a multilevel effort to bring
entrepreneurial solutions to achieve inclusive economic growth and to create pathways out of poverty
through the pillars of creating job opportunities, improving human capital, and addressing housing and
other infrastructure needs.
Our Bank’s focus on workforce development is particularly relevant at this moment, given that some of
the jobs that have been lost because of the COVID-19 crisis may never return. Others, even when they
do come back, will do so in a radically different form, thanks to the rapid technological shifts in the
workplace that the pandemic is only accelerating. Our research has shown that those most at risk for
COVID-19‒related job loss tend to be disproportionately young, low income, and from a racial minority.
Creating economic and professional mobility is going to be key in making sure all segments of the
country benefit from the recovery that is eventually coming. And I’m happy to announce that just today
the Philadelphia Fed is releasing a new paper that provides an encouraging roadmap for how that might
take place. You can read it on our website.
Fed economists looked at the skill sets of people in 33 metro areas across the country, including the
Philadelphia area, who are holding those jobs that are most at risk of disappearing. They then matched
those skills to jobs that would pay at least 10 percent more than their current wage and that don’t
require a traditional four-year degree.
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The bottom line is this: We don’t have to accept that those in at-risk, low-wage jobs will remain so
forever. The researchers found that nearly half of lower-wage employment can be paired with at least
one higher-paying occupation requiring similar skills. And the pay differences are significant, with an
average bump in wages of almost $15,000 — a 49 percent increase in salary. Transitioning people into
the right new job can mean the difference between a life of poverty and a solid, middle-class standard of
living.
The possibilities for creative public-private partnerships are very exciting. Transitioning low-wage
workers into higher-paying jobs not only helps companies themselves, insofar as they are tapping
underutilized human capital, but it also helps redress structural inequities. Communities of color stand
to benefit because they have for far too long and far too often been shut out of higher wage work.
At the Philadelphia Fed, we’ve helped launch just such a program, working in partnership with Comcast
and Philadelphia Works, our local workforce investment board. Philadelphia Works provides upfront
investment in a pilot job training program for Comcast. Comcast then pays for outcomes once they are
achieved, such as staying on the job for over six months. It’s a tremendous example of what thoughtful
public-private partnerships can accomplish.
Rather than staying stuck in this new normal or moving back to the old normal, in other words, I am
confident that together we can forge a better future — a better normal, perhaps — for all of us. Thank
you.

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